134 Alaska, Inc., is an accrual-basis C corporation that was incorporated on January 1, Year 1. At the end of Year 2, the corporation is considering converting to an S corporation. Alaska is required to determine its accumulated earnings and profits prior to conversion. The company has already calculated book net income, taxable income, and prior-year accumulated earnings and profits, and is now attempting to calculate the company's current earnings and profits. Assume that all items of income and expense have been properly reported by Alaska on Form 1120, U.S. Corporation Income Tax Return, for the appropriate years. Starting with taxable income as a benchmark, select from the option list provided the effect of each item in the calculation of current-year earnings and profits. Each choice may be used once, more than once, or not at all. Item 1. Unrealized losses at the end of the year on securities owned. 2. Federal income taxes accrued and paid during the year. 3. Gain on prior year installment sale recognized in the current year. 4. Nondeductible portion of meals and entertainment expenses. 5. State tax refunds from prior year received in current year. Effect !! E E E E B Select an option below O Add to taxable income (increase E&P) O Subtract from taxable income (decrease E&P) O No effect on E&P RESET CANCEL ACCEPT